Eugen Varga


The World Economic Situation

(22 November 1923)

From International Press Correspondence, Vol. 3 No. 72 [48], 22 November 1923, pp. 828–829.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

The hopes entertained by the capitalist world of an improvement in the situation of the world’s economics in 1923 have met with but a very slight degree of fulfilment. The improvement only extends to the United States, and certain parts of Europe: above all to France and Belgium, though it is very doubtful whether the improvement in the two last named countries is of a real character. It appears to be bound up with the slow depreciation of the rate of exchange. As we have learnt by experience, and especially by the example furnished by Germany, a depreciation of currency only causes a boom so long as the purchasing power of the money standard is considerably higher in the home market than in the world’s markets. So long as these conditions last, the country concerned is capable of exporting to the world’s markets. But at a certain point a change sets in – which can be observed at present in its crudest form in Germany – the depreciation of the rate of exchange no longer conceals the fact that in such countries, production is objectively dearer, calculated in working time, than in countries with a more stable valuta, this in turn involving a rise in prices beyond that of the world’s markets, despite a depreciated and falling rate of exchange.

The collapse of the capitalist world market is still proceeding, anti in even a more acute form. One symptom of this is the fact that the currencies of the neutral European countries, which for so long maintained their value as compared with the dollar, are now on the down grade: the Swiss franc, the Dutch florin, and the currencies of the Scandinavian countries, are now all showing a decline in relation to the dollar.

It is interesting to observe in this connection that two different circles have been formed in the international exchange of commodities, corresponding to the rates of exchange; the countries with depreciated currencies also form a circle among themselves. The exchange of commodities between countries with a high valuta and countries with a low valuta is becoming more and more difficult and restricted.

A glance at the various great economic areas yields ’the following picture:

The United States of America

The boom in the United States reached its highest point in the Spring (March/April). During the Summer a certain slackening was observable. This is evidenced alike by statistics as to production and the foreign trade statistics.

Production amounted to:




Balance of steel
trust orders

of cotton

(In thousands of tons)

(In 1000 bales)











In the course of the month of September a slight improvement seems to have set in again, but the data concerning production have not yet been published.

The point of decisive importance for us is the fact that the American boom was incapable of, raising European economics to a higher level. And all hope of it now doing so is past. Whilst the boom in the United States reached such a culmination during the months of March, April, and May that the trade balance of the United States showed an excess of imports over exports, in June a change set in: foreign trade showed a preponderance of exports over imports. This means that more American goods were thrown on the world’s markets than America purchased abroad. There is thus no further hope of America exercising a favorable influence on European markets, already suffering from a crisis. The imports of the United States, which amounted to 398 million dollars in March, sank to 275 million dollars by August. The hoped-for revival of the European market by means of extensive purchases on the part of America has thus proved illusory.

The American economic reports arc still optimistic in tone, but more and more voices are to be heard, especially in banking circles, expressing the opinion that the favorable state of the American markets cannot be maintained unless the European markets are restored. They point out that even in 1922, Europe absorbed 54% of the exports from the United States. The farmers are also in favor of action for the restoration of Europe. The price of agricultural products in the United States is determined by the world’s market prices, and these are determined by the prices which Europe is able to pay. The very limited purchasing power of Europe is absorbed to an increasing degree by Russia! In America, wheat has been used for feeding the cattle of late. It is suggested that credits be granted to Germany in the form of wheat supplies, etc. The readiness of the United States to take part in some sort of solution of the reparation problem is to be ascribed to these facts.

The British Empire

England is still in the most difficult position of all the countries of Europe. Her situation has grown steadily worse during the period just elapsed. The number of unemployed increases from week to week, and it is calculated that by the New Year there will be as many out of work as last year, if not more. The benefits derived by England from the occupation of the Ruhr have already ceased. Besides this, the situation of the textile industry continues to be extremely bad, and the restriction of cotton production is being prolonged from month to month. The English political economists appear to be more and more inclined to abandon the hope that England will be able to feed her population by exporting industrial articles in exchange for food and raw materials. Absolute perplexity prevails. Attempts arc being made to improve English agriculture, and to organize emigration to the English settlement colonies; all the traditions of English political economy are being called into doubt; protective duties and inflation of currency are being demanded!

The British Imperial Conference has been engaged in the attempt to convert the Empire into a self-sufficing economic whole, able to remain aloof from the rest of the world behind its system of preferential duties. But the deliberations showed that the economic position of the various English colonies varies far too much to allow of the possibility of such a plan being realized. Canada’s interests lie in the development of its industries, and it is already much more closely bound up with the United States than with England. And in other colonies independent industries have also sprung up since the war, and these would be very unwilling to submit to a new policy. This is especially the case with India. While on the other hand there is in England itself a strong party of industrial and commercial capitalists which is strongly opposed to the idea of a self-sufficing British Empire; these circles stand in fear of increased prices of food, which would result in higher costs of production, and ultimately in decreased competitive power in the world’s markets.

It would seem as if the divergence of interests is so great, that it is impossible for any unified economic policy to be arrived at. The confused condition of English economics is aptly characterized by the tendency being shown by very influential circles of industrial capital to take up the idea of an inflation policy, though perhaps not openly. In this regard the speech made at Glasgow by Geddes, the president of the powerful Federation of British Industries, is extremely characteristic. [1] In the course of this address he expressed his doubts whether the country would be able to bear, in addition to all other difficulties, the sacrifice demanded by a continual improvement in the value of the currency. Deflation had been carried on to a great extent for a number of years. For a number of years the value of the pound as compared with the dollar had been raised; there had been a frightful burden of unemployment; taxation had been terribly heavy. There should certainly be some sort of connection between the country’s financial policy and the economic situation. In international commerce, a policy of continuous deflation and continuous sinking of prices signified a displacement of trade, an increase of the burden of international debt, and a constant exertion to adapt prices and costs of production to the constantly sinking price level. It seemed to him (Geddes) that this added an unbearable burden to those already being carried. These burdens could be lightened by a policy less exclusively devoted to the improvement of the rate of exchange with America, and more to the restoration of permanent economic conditions, The speaker further announced that the report of the commission appointed by the Federation of British Industries for the purpose of studying this question would be published within a few days.

The idea of introducing a system of protective duties [2] and of bringing about an inflation, as well as the ever growing tendency to neo-Malthusianism, are the best proofs that the English political economists have lost all hope of the restoration of the conditions once vital to England in the economics of the world.

France and Belgium

At the present moment the economic situation of France and Belgium appears to be the most favorable of all Europe. The number of unemployed recorded is very small; France employs more and more foreign labor. As already mentioned above, this is to be chiefly ascribed to the gradual fall in the rate of exchange. This renders it possible for French and Belgian industry to sell their goods on the world’s markets, and to enter into keen competition with England and the United States. The English press has lately been filled with complaints about the intrusion of the products of the French wool and metal industries into the markets of England itself. The Bradford Chamber of Commerce recently demanded that the government should introduce protective duties in favor of the English wool industry. Within the last few days the French newspapers published reports as to an agreement said to have been come to between France and England, in accordance with which the products of the Ruhr valley, which have accumulated during the period of the Ruhr occupation, are not to be dumped on to the English markets (Matin, 25 October). [3] As already mentioned above, French and Belgian economics appear to be flourishing in the same manner as was the case with Germany in the years 1921 and 1922.


At the present time, Germany’s economic situation is characterized by a complete reversal in the matter of prices. After the middle class has been entirely expropriated by means of the inflation, a state of affairs has been arrived at compelling the middlemen selling to the final consumers – the small dealers, craftsmen, innkeepers, etc. – to resort to calculating in gold marks, in order to avoid being left absolutely without the means for renewing stock. This has swept away the last appearances of cheap production and economic prosperity. What we have always insisted on has now become apparent; production in Germany is in effect dearer than in the world’s markets. This has given rise to an acute crisis in the finding of markets. Unemployment grows from day to day, and when we call to mind the unemployment in the Ruhr district, concerning which we have no data, we can estimate the number of those out of work as far exceeding a million and the number on short time at several millions.

The transition to the gold mark calculation reveals the absolute impoverishment of Germany. Those shops which sell articles of general use, clothing, footwear, etc., are bare of customers. The general impoverishment of the whole middle and working classes is such, that there are no purchasers for such goods at the present prices. The profits which the tradesmen hoped to gain by adopting the gold mark calculation are not realized owing to the lack of buyers. Since prices have risen the foreigner has disappeared as a buyer. The rich peasantry are already well supplied with industrial articles; the poor peasantry arc equally unable to buy, for they arc heavily burdened by the new taxes, and the frightful rate at which money loses in value renders them afraid of putting their slight surplus of food products on the market. German economics have thus become involved in a crisis of such acuteness as is probably unexampled in the history of capitalist economics. The unsolved reparation question, the tendency to disruption in the Reich itself, the hopeless situation of German finances, all these contribute to increase the hopelessness of German economics.

In spite of the fresh taxes, in spite of the abandonment of the resistance in the Ruhr area, expenditure rose more than the dollar in the 10 days between the 10th and 20th October. Again the state revenues do not cover one per cent of the expenditure; 99% is covered by the printing of banknotes. And no bourgeois government will be in the least able to alter these conditions.


Japan is an ultra-European great power whose economic progress has received a severe setback owing to the earthquake catastrophe. The inner economics of Japan naturally show at the moment, a certain revival as a result of the extensive work of restoration, but there is no doubt Japan is paralysed for a time as a factor in international economies. The Japanese catastrophe has caused certain favorable economic effects in other countries, especially in the silk industry of Italy and France, in the same way as the Ruhr occupation improved the trade of other countries; this, however, is devoid of significance for the world’s economics as a whole.


To sum up, we can only repeat that, with the exception of the United States, where a satisfactory amount of economic prosperity may be locked for for a considerable period, although the boom of this Spring may not be repeated, the economics of the whole capitalist world, and above all of the European capitalist countries, arc still in a state of chronic crisis. Indeed, we may safely assert that the situation of European economics has rather deteriorated than improved during the period just passed through.

* * *


1. As early as September 9, the English Minister of Labor delivered a vague speech to the same effect.

2. The Prime Minister, Baldwin, again expressed himself a short time ago as decidedly in favor of the introduction of protective duties.

3. The organ of French heavy industry l’Usine, Oct. 27, confirms this report, and observes that this has been a friendly service, and that the reserve stock of iron accumulated in the Ruhr has not exceeded 100,000 tons.

Last updated on 3 May 2023